- The Fed delivered its first rate hike in three years, sending the 10-year Treasury yield back above 5% as investors priced as many as two more hikes through year-end.
- Yields sank Thursday as appetite returned to the Treasury market, with the 10-year yield dropping after weeks of volatility that had driven yields to their highest levels in years.
- Roughly $7 billion flowed into the iShares 20+ Year Treasury Bond ETF on the morning of the Fed decision, despite TLT losing about a third of its value over five years.
- Bloomberg ETF analyst Eric Balchunas described the flow as "jackpot mode," with TLT's 16-to-17-year duration positioned for a high-single-digit NAV gain if long yields fall 50 basis points.
- The trade's validation hinges on the 30-year yield moving back below 5.20% after the Fed statement and dot plot, with 20- and 30-year yields the key macro factor to watch.
Quotes
“A bond market rebound may be in the works after weeks of volatility that sent yields to their highest levels in years.”
“Jackpot Mode”
“where traders are betting on a rare bond market move when interest rates eventually fall”